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Lou Dobbs Tonight

NASA Engineers Decide Whether They Can Launch Space Shuttle Discovery; Mexican Presidential Election Too Close to Call; North Korea Threatens Nuclear Strike if U.S. Attacks; Former Soldier Charged With Murder; Tension in Gaza after Palestinians Set New Deadline in Crisis Over Kidnapped Israeli Soldier; Thousands of Veterans Forced to Wait For Tuition Aid; Tough Reelection Bid For Lieberman

Aired July 03, 2006 - 18:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

KITTY PILGRIM, CNN ANCHOR: Tonight, there's new uncertainty about the space shuttle Discovery. NASA engineers are trying to establish whether the shuttle can blast off safely tomorrow as planned.
We'll have a live report from Kennedy Space Center.

ANNOUNCER: This is LOU DOBBS TONIGHT, news, debate and opinion.

Sitting in for Lou Dobbs is Kitty Pilgrim.

PILGRIM: Good evening, everybody.

NASA engineers tonight are meeting to decide whether they can launch the space shuttle Discovery tomorrow. Now, the launch is threatened by a crack in the foam insulation on a fuel tank.

The blastoff has already been delayed by bad weather. If the launch goes ahead, it will only be the second shuttle mission since the Columbia disaster.

John Zarrella reports from the Kennedy Space Center -- John.

JOHN ZARRELLA, CNN CORRESPONDENT: Kitty, you know, foam insulation has certainly been the issue ever since Columbia and the accident that the foam caused on Columbia, and then again with Discovery, a year ago, foam insulation falling off the giant external fuel tank. Again, NASA bit by this bug.

The engineers -- there you have a shot of the shuttle out there on the launch pad right now -- uncertain as to whether we will have a liftoff here tomorrow. The NASA mission management team is meeting right now, beginning that meeting. It was supposed to have started at 6:00 Eastern Time to determine whether they will launch tomorrow.

Now, what had happened was this: in the overnight hours, the -- in a routine inspection of the vehicle, on the external tank, up on the top end of the external tank, what they found was a crack about five inches long and about one-eighth of an inch deep. And you can see the location there on that graphic, where the crack was. And that crack -- also, from that crack, a tiny piece of insulation fell, and they believe they found that at the base of the shuttle. So, they sent engineers out to today to try to determine whether they need to fix that crack, whether they can fly as is. And if they do have to fix it, they're going to have to go out there and build some scaffolding around that area to do a fix. So, right now, that's what mission managers are meeting to decide.

But earlier today, the management team said that had they flown the way the vehicle is right now, and had they lost that tiny piece of foam, it would not have been catastrophic.

(BEGIN VIDEO CLIP)

JOHN SHANNON, DEPUTY SHUTTLE PROGRAM MANAGER: The obvious question is well, gee, if this one had happened in flight, and this piece of foam would have come off, would that have been an issue? And the answer is, no, absolutely, it would not have been an issue. It is less than half the size that we think can cause damage to the -- to the orbiter. So, although it is in an area that we don't like to have foam come off, this was not unexpected and it would not have caused any damage to the orbiter itself.

(END VIDEO CLIP)

ZARRELLA: Now, it's unclear as to how long this mission management meeting is going to go on. It may be an hour, or two hours. It just depends on how much discussion is needed by the engineers and the managers to get their arms around this, Kitty, to determine the critical question, are they safe to fly as is, or are they going to have to stand down to try to do some repairs -- Kitty.

PILGRIM: John, the other great variable, of course, is the weather. How are we looking for tomorrow?

ZARRELLA: Yes, the weather is always a problem here in Florida. And unfortunately, tomorrow was expected to be the better of the days in the days ahead. So if they have to stand down tomorrow -- and maybe it's an easy fix they can do in a day or two -- then as we move towards the end of the week, middle, end of the week, they're going to be fighting weather issues again here in Florida.

Always the case. Summer afternoon thunderstorms.

PILGRIM: All right. Thanks very much.

John Zarrella.

Thanks, John.

Well, if NASA does launch the shuttle tomorrow, we'll have live coverage for the blastoff. Our special broadcast will begin at 2:00 p.m. Eastern here on CNN.

There is a political standoff in Mexico tonight. The Mexican presidential election remains too close to call. Both candidates are declaring victory. The outcome is critically important to the United States. Casey Wian reports -- Casey.

CASEY WIAN, CNN CORRESPONDENT: Kitty, Mexico's presidential election should seem familiar to most Americans. Two candidates are claiming victory. Supporters of one are alleging fraud. And the outcome could be in doubt for several days.

(BEGIN VIDEOTAPE)

WIAN (voice over): In Mexico, the left claims victory.

ANDRES MANUEL LOPEZ OBRADOR, MEXICAN PRESIDENTIAL CANDIDATE (through translator): I want to inform the people of Mexico that according to our data we have won the presidency of the republic.

WIAN: So does the right.

FELIPE CALDERON, MEXICAN PRESIDENTIAL CANDIDATE (through translator): The exit polls say that we have won the presidential election.

WIAN: For one presidential candidate, the bravado will prove premature.

LUIS CARLOS UGALDE, MEXICAN FEDERAL ELECTIONS INST. (through translator): The margin of difference between the first and second place is so narrow that it is not possible to say at this point in time who has won.

WIAN: In the United States, there are hopes a new president will begin to end Mexico's policy of encouraging millions of its citizens to cross our borders illegally, its economic addiction to the $20 billion a year Mexicans send home, and it's legacy of political corruption.

MARCO VICENZINO, GLOBAL STRATEGY PROJECT: Obviously, both are committed to change, but they have different visions of how change has to take place in the country. So I think more -- the positive element is that -- of this entire election is a process whereby the Mexican political system, Mexican political culture is changing gradually over time, I think for the better, but it is a long way still to go.

WIAN: Leftist Obrador is often compared to Venezuela's radical Hugo Chavez. He promises to redistribute Mexico's considerable wealth and create jobs for Mexicans in Mexico. Those policies could diminish the exodus of his countrymen.

MARK WEISBROT, CENTER FOR ECONOMIC & POLICY RESEARCH: Mexico's had a terrible economic failure over the last 25 years if you look at just growth of income per person. If the Mexican economy had just continued to grow at the rate that it grew prior to 1980, it would have the -- the country would have living standards at the level of Spain today and you'd have very few people really willing to take the risks of illegal immigration.

WIAN: Calderon, from outgoing President Vicente Fox's conservative party, warns a radical shift could endanger Mexico's economic reforms, a curious threat because those reforms have kept nearly half the country in poverty.

(END VIDEOTAPE)

WIAN: For the first time, Mexicans living abroad were permitted to vote in this election. But fewer than 1 percent did so. One reason for that is that illegal aliens living in the United States would have had to return home to Mexico first to register and then risk getting caught sneaking back across the border -- Kitty.

PHILLIPS: Interesting. Thanks very much, Casey.

And later in the broadcast, two leading authorities on Mexican politics will join us from Mexico City. Former Mexican foreign minister Jorge Castaneda and political analyst George Grayson will join us.

North Korea today escalated its nuclear confrontation with the United States. North Korea said it would respond to any U.S. attack with a nuclear strike. The United States said it will defend itself if necessary. The military has deployed interceptor missiles in California and Alaska to shoot down enemy missiles.

David Ensor reports on the North Korean threat -- David.

DAVID ENSOR, CNN NATIONAL SECURITY CORRESPONDENT: Kitty, no doubt about it, the language from North Korea is intense, threatening an "annihilating strike and nuclear war" if the U.S. should preemptively strike to prevent a possible long-range missile test. That's strong language, but it's bluster, in the view of U.S. analysts, from a nation that has often favored exaggerated rhetoric.

American intelligence officials say, though it is true that North Korea currently has a long-range missile on its launch pad that may have been fueled up, and although they believe North Korea has some nuclear device, bombs, there's no evidence it's anywhere close to having a nuclear weapon that could fit atop a missile and survive launch. They just aren't that technologically advanced, U.S. officials say. But periodically they say that North Korea fires off a volley of threatening rhetoric to get the West's attention.

Now, it is possible Pyongyang may fire off that missile, which could possible reach U.S. soil, Alaska, for instance, but there is no nuclear weapon on it. And U.S. officials say the North Koreans do not have the capability yet to back up these latest threats -- Kitty.

PILGRIM: Well, the United States and Europe are giving Iran an extra week to respond to their offer of nuclear talks. Diplomats say Iran must decide by July 12th whether or not to begin talks on its nuclear program.

However, a senior Iranian official today said Iran will not suspend the enrichment of nuclear fuel. "This is a key Western demand, the official said, "since suspension is definitely not on Iran's agenda." Federal prosecutors today charged a former soldier with murdering four Iraqi civilians near Baghdad in March. Now, the soldier, Steven Green, served nearly a year in the 101st Airborne Division.

Barbara Starr reports.

(BEGIN VIDEOTAPE)

BARBARA STARR, CNN PENTAGON CORRESPONDENT (voice over): Twenty- one-year-old Steven Green appeared in federal court in North Carolina on charges he raped and murdered a young girl and murdered her family in March while he served on active duty with the 101st Airborne Division in Mahmoudiya, Iraq. According to an FBI affidavit, he recently was discharged due to a personality disorder.

Federal prosecutors detailed the case that came to light only after soldiers from the unit had a stress counseling session following the recent murder of privates Kristian Menchaca and Thomas Tucker. One soldiers told investigators four soldiers went to a house to rape an Iraqi woman on March 12th, but first they drank alcohol and some of them changed into dark clothing, according to the affidavit.

Court documents also allege that when they got to the house, three of the family members were taken by Green into a bedroom and shot. One was a girl estimated to be 5 years old, and her parents.

According to the criminal complaint, witnesses told investigators that Green said, "I just killed them. All are dead."

Witnesses told investigators that then Green and another soldier raped the family's older daughter. The same witnesses told investigators they saw Green shoot her in the head at least two times.

STARR: So far, Green has not entered a plea, and his attorney did not return a phone call from CNN seeking a comment. This is the fifth case in recent weeks in which U.S. troops are said to be involved in the killing of Iraqi civilians.

Barbara Starr, CNN, the Pentagon.

(END VIDEOTAPE)

PILGRIM: Still ahead, why it's taking so long for our veterans to receive education aid promised by the federal government. We'll have a special report ahead.

Also, an outsourcing scandal in India is raising new fears about whether your personal data is safe from theft.

And Senator Joe Lieberman makes an important announcement about his political future as he cites a fierce primary challenge.

That story and much more ahead.

(COMMERCIAL BREAK) PILGRIM: There's rising tension in Gaza tonight after Palestinians set a new deadline in the crisis over the kidnapped Israeli soldier. Palestinian groups that abducted the soldier want Israel to begin releasing Palestinian prisoners tomorrow, but Israel is refusing to negotiate and is launching new airstrikes tonight.

John Vause reports from Gaza and joins us now -- John.

JOHN VAUSE, CNN CORRESPONDENT: Kitty, within the last few moments, an Israeli helicopter in the skies over Gaza City has launched another airstrike here. We believe the target's just south of our position here.

You can see the smoke rising in the distance. It's in the area of the Islamic University.

Also around that area, we understand the foreign ministry, the finance ministry and the ministry of construction. This would follow a pattern carried out by the Israelis over the last six or seven days targeting the offices of the Palestinian Authority because Israel holds the Palestinian Authority responsible for the kidnapping of 19- year-old Gilad Shalit.

All of this comes also within the hour. Palestinian security sources telling CNN that about 30 Israeli tanks and armored personnel carriers have crossed the border from Israel into Gaza in the north of the Gaza Strip, around the town of Beit Hanun.

According to these Palestinian witnesses, Israeli armored bulldozers have been digging sand berms which are often used as protection for ground forces before they move into the area. Also, Israel has confirmed there was an airstrike around the same time within the hour in the north of the Gaza Strip killing at least one Palestinian and wounding three others -- Kitty.

PILGRIM: John, so the airstrikes come at night typically?

VAUSE: Yes, pretty much around this time at night. A deliberate target by -- a deliberate tactic, rather, by the Israelis.

They target these buildings at night because they will not be -- or rather because they will be empty. The objective of this is to send a clear message to the Hamas government that time really is running out. And now that deadline, less than five hours to go before that deadline which has been set by the Palestinian militants. They've warned that unless this military offensive ends, and if Israel does not release some 1,500 Palestinian prisoners being currently held in Israeli jails, then the Palestinian militants will consider the case on Gilad Shalit as case closed -- Kitty.

PILGRIM: And any word at all on the fate of the Israeli soldier?

VAUSE: Well, we've just lost power here, Kitty. But I assume that you can still see us.

PILGRIM: We can. VAUSE: What we're being told, the Israeli intelligence believes that he's still being held somewhere in southern Gaza. As far as his condition, it remains unconfirmed.

There have been a number of reports that he was treated by a Palestinian doctor. That came from a deputy Hamas minister. However, the militants who are holding him released a statement saying no one has seen this soldier. So his condition remains unclear.

There's been no proof of life, no photograph, no video put out by the hostage-takers. But the assumption is that he is still alive. However, there is less than five hours to go on that deadline, so there are grave fears for his safety at this hour -- Kitty.

PILGRIM: All right. Thank you very much, John, for that update. And we'll follow events as they happen throughout the evening.

Thank you very much.

John Vause.

Thanks, John.

Tonight the U.S. government is being charged with breaking a promise to our nation's veterans who need help with the cost of higher education. Thousands of veterans are being forced to wait for months for tuition aid promised by the Department of Veteran Affairs. Some colleges are now denying enrollment to our nation's vets.

Lisa Sylvester reports.

(BEGIN VIDEOTAPE)

LISA SYLVESTER, CNN CORRESPONDENT (voice over): Ross Holtan served six years in the Army. When he returned from Iraq, he enrolled at the University of Minnesota using his military benefits. But when he tried to sign up for his second semester, he was told he couldn't because his GI education funds were not yet available.

ROSS HOLTAN, ARMY VETERAN: That's kind of one of the main reasons that a lot of people that go in is because, you know, that money is going to help them get through college. So then if -- you know, I don't have the money to go into the next semester, you know, I'm kind of out of luck.

SYLVESTER: As troops return from overseas, the Veterans Administration's GI program has been swamped, creating backlogs. Inventory claims last week topped 94,000, up 17 percent from last year.

The problem is particularly acute in the Midwest. First-time applicants in February waited on average 56 days for their paperwork to be processed.

JOSEPH SHARPE, AMERICAN LEGION: Some will take out commercial loans. Some will borrow money from other individuals. Or some will just have to sit out that semester.

SYLVESTER: The Department of Veterans Affairs acknowledged there needs to be changes. It has recently hired additional staff. But in this statement, added that the Pentagon shares some of the blame. "We may have to go back to the military to get missing information, or if we have information from two sources that has to be reconciled before we can authorize the benefit."

Meantime, some states are not waiting for the federal government. Wisconsin recently passed legislation that gives any veteran who was a state resident at the time of entry on to active duty 100 percent free tuition.

JOHN SCOCOS, WISCONSIN SECY. OF VETERANS AFFAIRS: We've been progressive in looking for things that are going to help improve the economy in this state, help make these veterans employable, and make a better life for them.

SYLVESTER: But for Ross Holtan back in Minneapolis, each semester is still a waiting game. Will his college GI check be there on time?

(END VIDEOTAPE)

SYLVESTER: Now, the University of Minnesota recently changed its policy to be more lenient and flexible for veterans. Now instead of a blanket refusal to enrollment if their GI money has not yet arrived, the university will consider the student's individual situation and make a case-by-case decision -- Kitty.

PILGRIM: Well, that at least is some progress on it.

Thanks very much.

Lisa Sylvester.

Also tonight, a new survey says our nation's veterans returning from Iraq are having a hard time finding work. Now, the Web site careerbuilder.com says one in five veterans have waited six months or longer to find a job. One in 10 of our nation's vets say it took them more than a year to find work. The unemployment rate for veterans aged 20 to 24 is now three times the national average.

And that brings us to the subject of tonight's poll.

Do you believe that U.S. companies should be required to hire U.S. veterans instead of seeking out cheap foreign labor? Yes or no?

Cast your vote at LouDobbs.com. We'll bring you the results later in the broadcast.

Coming up, we'll be reading your e-mails.

Also, why isn't the U.S. Army buying American? A new multibillion-dollar helicopter contract is heading overseas. We'll tell you where. Also, Congress begins dueling hearings this week on immigration reform. I'll talk to a congressman who is blasting Republicans for holding these hearings.

And what does a political standoff in Mexico mean for U.S.- Mexican relations and our nation's illegal alien crisis? Well, one of the nation's most respected experts on Mexico will join us.

Stay with us.

(COMMERCIAL BREAK)

PILGRIM: The outsourcing industry tonight is reeling from a new identity theft scandal. A worker at an HSBC Bank outsourcing center in Bangalore, India, is under arrest. Now, the charge is selling customers' personal data to thieves in the United Kingdom.

More than $400,000 was stolen from the HSBC customer accounts. This theft went completely undetected until HSBC customers began complaining about the money disappearing from their accounts.

Well, this is the third identity theft scandal to hit the Indian outsourcing industry in just over a year. Last August, three former Indian call center employees were charged with stealing $350,000 from U.S. Citibank customers. And last June, an undercover reporter brought -- bought personal data from more than 1,000 banking customers from an Indian outsourcing center employee.

Now, the outsourcing industry fears that these incidents will raise new concerns about its safety standards in India.

Delphi is increasing its investment in communist China. The auto parts maker declared bankruptcy in the United States, and Delphi is eliminating 80 percent of its American workforce. The company says its plants in Shanghai will have its best engineering resources.

Delphi's operations in communist China are profitable and the company admits it could use those profits to meet its pension obligations to American workers. But instead, Delphi split off its American operations and declared bankruptcy.

The Army is buying more than 300 new helicopters from Europe. Now, this deal could be worth as much as $3 billion over the next 20 years. They will replace the helicopters known as the Kiowa, that have been in service since the Vietnam War. Now, this is the first major U.S. defense contract for the French-German company EADS.

And coming up, Senator Joe Lieberman says he'll run for re- election even if the Democrats don't want him. What's going on in Connecticut? Well, senior political analyst Bill Schneider reports.

And Mexico's presidential candidates battle to a standoff. How will it impact illegal immigration and security on our southern border with Mexico? A former foreign minister of Mexico joins me.

Also, a subway accident leaves at last 41 dead in Spain. We'll have the details on the rush hour tragedy.

Stay with us.

(COMMERCIAL BREAK)

PILGRIM: Still ahead, it's still too close to call a winner in Mexico's election. I'll speak to former Mexican foreign minister Jorge Castaneda on Mexico's disputed presidential vote.

But first, here's an update on today's other headlines.

At least 41 people were killed today when a subway train derailed and crashed in Valencia, Spain. More than 47 others were hurt.

Now, officials are ruling out terrorism as a cause of the crash. They say the train was traveling at high speeds when it jumped off the tracks and slammed into the tunnel walls.

Tough new immigration laws targeting students go into effect in France tomorrow. Tens of thousands of students who are in France illegally will be eligible for deportation. Thousands of students who are working to legalize their status before an amnesty provision runs out and new illegal immigration loss take effect in France.

And the countdown continues for the launch of the space shuttle Discovery tomorrow, despite a newly discovered defect on the shuttle's fuel tank.

John Zarrella is live at the Kennedy Space Center with the very latest on that -- John.

ZARRELLA: That's right, Kitty, but still not certain that there's actually going to be a launch tomorrow. Mission managers are meeting now to decide whether they will attempt to launch Discovery tomorrow.

In the overnight hours, an inspection team -- a routine inspection up on the external tank found some cracks in the insulation, the foam insulation up around the liquid oxygen tank on that external tank, the portion of the tank. So now they have to decide whether they're going to fix it or fly as is.

The engineers reported back to mission managers this afternoon what they think needs to be done or doesn't need to be done. And that team of mission managers now meeting to determine whether they will fly as is or stand down tomorrow to fix that small crack about five inches long and an eighth of an inch deep -- Kitty.

PILGRIM: John, the engineers were the first to raise objections to going ahead with the launch, correct?

ZARRELLA: Yes, there a couple of engineers, back when they decided to go ahead with the launch of Discovery, who raised issues about the foam insulation and not enough understanding of the foam insulation on these vehicles since the problems have developed three- and-a-half years ago with Columbia. NASA spent over $1 billion on the foam insulation issue. And, unfortunately, there are still some bugaboos with it. So we have to wait and see, hopefully a decision in the next hour or two on whether there will be a launch here July 4th tomorrow -- Kitty.

PILGRIM: All right, John. Thanks very much for keeping us up to speed on that, John Zarrella.

Senator Joe Lieberman says he will run for reelection even if the Democratic Party won't have him. The former vice presidential candidate is facing a surprisingly strong challenger in the Democratic primary next month.

Bill Schneider has the story on that -- Bill.

WILLIAM SCHNEIDER, CNN SR. POLITICAL ANALYST: Kitty, Joe Lieberman is a third-term senator who was on the Democratic national ticket. Now he's facing a tough fight for renomination in his own party. Why? One word -- Iraq.

He wrote in the "Wall Street Journal" last November, quote, "What a colossal mistake it would be for America's bipartisan political leadership to choose this moment in history to lose its will." And in the famous phrase, "to seize defeat from the jaws of the coming victory." That article enraged Democrats across the country and drew a primary challenger into the race.

Now, what if Lieberman loses the August 8th primary? To stay on the November ballot as an independent, he has to file a petition the day after the primary, so he has to start gathering signatures now. But if he leaves the Democratic Party, he'll forfeit the primary to his opponent. So he's taking out an insurance policy.

(BEGIN VIDEO CLIP)

SEN. JOE LIEBERMAN (D), CONNECTICUT: While I believe that I will win the August 8th primary, I know that there are no guarantees in elections. I'm very confident that if every Democrat, or even a majority of them, vote on August 8th, I will be nominated by a comfortable margin. But no one really knows how many Democrats will come out to vote on what may be a hot day in August.

(END VIDEO CLIP)

SCHNEIDER: Lieberman argues that his service should not be judged by a small turnout of activist primary voters, but by all the voters of Connecticut. If he loses the primary, he intends to run in November as what he calls an independent Democrat, against the officially nominated Democrat. And that will, of course, split the Democratic Party.

In fact, it already has. National Democrats like Senate Leader Harry Reid, Senate campaign chairman Charles Schumer and Lieberman's Connecticut colleague Chris Dodd have already declared their support for Lieberman in the primary, thereby infuriating anti-war activists. It is not clear what they'll do if Lieberman runs as an independent -- Kitty.

PILGRIM: Complicated stuff, Bill. Thanks a lot, Bill Schneider.

SCHNEIDER: Sure.

PILGRIM: Well, the successor to Mexico's president Vicente Fox will play a significant role in the illegal immigration and border security crisis facing this country, but the outcome of Mexico's presidential elections is still in doubt. Jorge Castaneda served as Mexico's foreign minister under President Vicente Fox, and he joins me now from Mexico City.

And thanks very much for joining us, sir.

JORGE CASTANEDA, FMR. FOREIGN MINISTER: Thank you, Kitty, for having me.

PILGRIM: There are 300 districts. It's a very close count, and they're going to start on July 5th to go district by district and count this vote. In the meantime, the Mexican people have to wait. How do you predict this will affect the Mexican population?

CASTANEDA: Well, I think most people in Mexico are now assimilating to the fact that Felipe Calderon, the National Action Party candidate, President Fox's party, and President Fox's candidate, has won the election by roughly 400,000 votes. This will take some time to be processed.

It will not come without challenges and contests and discussions and maybe even some rather strong debates, but I think at the end of the day, there is an increasing perception in Mexico City tonight and Mexico throughout the country, that the country's next president will be Felipe Calderon.

PILGRIM: Nevertheless, this is a razor thin percentage, less than one percent. And both candidates have declared victory. Let's listen to what President Vicente Fox said in terms of appealing for calm with the Mexican population.

(BEGIN VIDEO CLIP)

VICENTE FOX, MEXICAN PRESIDENT (through translator): The people have spoken by voting, and now we expect parties and candidates who participated in this process will contribute to the climate of trust and peace that must prevail.

(END VIDEO CLIP)

PILGRIM: All right, that appeal for calm. This, however, a fairly successful election. Mexico's been fraught with fraud in their elections, and I go back to the 1998 election. Do you think that this is a successful, well-executed election?

CASTANEDA: I think within the bounds of reason and within the certain immaturity of Mexican democracy, this was a successful election. There may have been tampering on one side or another. For example, the opposition candidate, Lopez Obrador, for some strange reason had 10 percent more voter turnout in Mexico City, his stronghold, than everywhere else in the country.

There may have been some ballot stuffing in the city, there may have been some fooling around here and there, but overall I think it was a free and fair election. I think that's what most international observers who were in Mexico City and throughout the country have determined.

And I think that Calderon won, though by a razor thin margin, as you said, Kitty -- I agree with you completely. You're quite right. It's razor thin, but sometimes that's how elections are won. If I recall in the year 2000, the United States, that's how President Bush was elected if I'm not mistaken.

PILGRIM: Well, that is a point taken, sir.

Let's talk about the Mexican Congress, also decided yesterday. None of the major three parties has a majority at this point and PRI is now in third place for the first time. Will there be -- whoever gets this, this election, will have to get the support of Congress. Will that be difficult with its split so evenly?

CASTANEDA: It will be very difficult and President-Elect Felipe Calderon is going to have a very difficult time of getting anything done, really with this Congress. It's very splintered, very divided and he has a very small plurality in the Congress.

When I spoke with your colleague, Lou Dobbs, a week ago, Kitty, I made very clear that my stance was to support Felipe Calderon. I'm very happy that he was elected. But I also have to acknowledge that he will have a very difficult time of getting things done.

Mexican institutions are not made for democracy, they're not made for a split Congress, for divided government. And we're going to have to do something about that. That's really the main challenge he will face.

PILGRIM: Well, I think most of our viewers will want to know how that affects U.S. relations with Mexico?

CASTANEDA: Well, hopefully -- and I'm relatively sure of this -- Felipe Calderon will continue President Fox's policies of cooperating with the U.S. on issues such as security, such as border law enforcement, drug enforcement.

On immigration, there are a lot of commitments that President Fox has made to President Bush on the understanding that there will be immigration reform. If, of course, there is no immigration reform, there will be no commitments.

But I think by and large, Felipe Calderon represents continuity with Fox, continuity with President Zedillo, who was Fox's predecessor. I think that's the best thing for Mexico, and perhaps, most importantly, for your audience, Kitty, the best thing for U.S.- Mexican relations. I think the U.S. will have a friend in Felipe Calderon, and I hope Felipe Calderon will have a friend in President Bush.

PILGRIM: All right. On that note, we thank you very much for joining us. Jorge Castaneda, thank you, sir, for joining us this evening.

CASTANEDA: Thank you very much, Kitty.

PILGRIM: We'll have more on the Mexican election just ahead. First, let's take a look at some of your thoughts.

Now, Leonard writes, "Congress and the president gave us NAFTA and CAFTA and now with immigration, sales of ports to foreign countries, high gas prices, and much more. They've managed to give us the SHAFTA."

Bruce in Florida, "Regarding the National Guard presence or lack thereof, on the border, remember these guys are all dressed in camouflage and may be difficult to find."

Frank in Florida writes, "If your boat is leaking and your pump isn't working, you plug up the leak before the boat goes down. Then fix the pump. I don't know what's wrong with those idiots in Washington, but this boat of ours is going down."

And Jim in New Jersey writes, "If the government cancels out its own laws as it pertains to immigration, then why have any laws at all?"

Terrence in New York writes, "It seems that two illegals make a legal. Begin with an illegal alien using illegal IDs and the Senate will grant him the right to become a legal citizen. Only in America."

And Andrew in Texas writes, "Is Ross Perot still available? That giant sucking sound of jobs leaving the country is so loud that I have to turn up the volume on my TV just to hear you."

Send us your thoughts, LouDobbs.com. We'll have more of your thoughts later in the broadcast.

And ahead, I'll speak with a leading expert on Mexico's political affairs about the candidate who wants to cancel NAFTA.

And a member of the Congressional Hispanic Congress says upcoming hearings on so-called comprehensive immigration reform are nothing more than a political show. Congressman Silvestre Reyes joins me. Stay with us.

(COMMERCIAL BREAK)

PILGRIM: We continue our discussion of Mexico's presidential election and Manuel Lopez Obrador is one of the candidates who has already declared victory. In the campaign, Obrador promised to cancel parts of NAFTA, the North American Free Trade Agreement, which have forced thousands of Mexicans to cross the border into the United States. Now George Grayson wrote a biography of Manuel Lopez Obrador and he joins me now from Mexico City. Very nice to see you and I know you have probably been in for the haul for days. How tight is this and tell us what you think of it so far?

GEORGE GRAYSON, PROFESSOR, WILLIAM & MARY COLLEGE: Kitty, this is the typical headline on newspapers. It's really almost 50-50, but as Jorge Castaneda pointed out, Felipe Calderon has a slight advantage. But we can bet that if Lopez Obrador apparently is the loser, that he will contest the outcome. And in fact, the electoral authorities have until September 6th to decide the winner.

PILGRIM: Yes. Though they're going to start the recount on the 5th. You know, another thing that Mr. Castaneda told us that is intriguing. He said that Calderon would be a friend of the United States. How do you assess that remark?

GRAYSON: Well, he is a modern person. He believes in the global economy. He supports the free trade agreement. He realizes that the market-oriented system is the coin of the realm now. And he's determined to create jobs by making the Mexican economy more efficient and trying to break many of the bottlenecks that lead Mexico to lose market share to China and other Asian dynamos. So I think to the extent that he can achieve sustained growth, that will be good for bilateral relations.

PILGRIM: And yet President Fox did very little to those relations and yet he follows in the sort of same political footsteps, does he not?

GRAYSON: Well, Felipe Calderon has much more experience. There's a saying in Mexico that one has an olfacto politico. That is a political nose. And Calderon has served one term on Mexico's city council. He's twice served as a federal deputy. And for three years was the leader of his party's faction.

So he knows how to bargain and negotiate and log roll, something that Fox never understood. Fox was a great campaigner, but just didn't have it in his DNA to form alliances, which I think Felipe will be able to do.

PILGRIM: You know, you wrote a book on Lopez Obrador. And he declared victory last night, even though it was fairly clear that Calderon had a lead. Let's listen to what he said and then I want to ask you his reaction -- what his reaction might be.

(BEGIN VIDEO CLIP)

MANUEL LOPEZ OBRADOR, PRESIDENTIAL CANDIDATE, MEXICO (through translator): I believe this result is irreversible. I mean to say that we have won. And I am very grateful to the majority of the Mexicans for their support.

(END VIDEO CLIP)

PILGRIM: Now, he has a history, does he not, of contesting elections?

GRAYSON: Yes, the two elections that he has lost, he has contested. But to his credit, he was the victim of fraud in both of those contests. But Lopez Obrador feels that he represents the mass of poor Mexicans, and that they deserve a better shake.

And he has messianic tendencies and he doesn't have any respect for the system he calls efay (ph), which is the electoral institute, a bought empire. Therefore, I suspect that his walk through fire of militants are going to be staging protests and perhaps ugly demonstrations if and when Felipe Calderon is declared the winner.

PILGRIM: What will that mean for U.S. relations? Will that create an impasse on getting any business done or anything negotiated or talked about?

GRAYSON: My sense is, Kitty, that the electoral authorities here are going to draw out the vote recount and then there can be challenges to whatever this electoral institute decides with regard to the winner.

So the whole process may take a week or 10 days. During that time, the wiser heads here I think will mobilize a coalition of church leaders, the business community, scholars, international observers, the United Nations to support whoever is declared the winner and to try to paint Lopez Obrador into a corner to minimize the kind of nasty demonstrations that could take place.

PILGRIM: All right, thank you very much for helping us sort through this because this is quite a confusing situation. George Grayson, thanks very much.

GRAYSON: Thank you, Kitty.

PILGRIM: And here's a reminder now, to vote in tonight's poll. Do you believe that U.S. companies should be required to hire U.S. veterans instead of seeking out cheap foreign labor? Yes or no. Cast your vote at LouDobbs.com. We'll bring you the results in just a few minutes.

Scientists say a huge asteroid speeding through space passed dangerously close to earth last night. Astronomically speaking, that is. This asteroid is thought to be as large as half a mile long. It came within about 260,000 miles of hitting earth. That's about the distance from the earth to the moon. Scientists say this is the largest of some three dozen asteroids that have flown close to the earth in the past few years.

Well still ahead, a border state congressman says upcoming hearings on illegal immigration are nothing but a political show. Congressman Silvestre Reyes joins me. Stay with us.

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PILGRIM: The immigration reform battle in Congress is set to escalate again this week. Senate Judiciary Committee Chairman Arlen Specter begins hearings on the House immigration bill in Philadelphia on Wednesday, and the same day that House Republicans hold hearings on competing Senate immigration bill in San Diego.

Congressman Silvestre Reyes is a member of the Congressional Hispanic Caucus. He is accusing Republicans of trying to distract the country with these hearings, and he says these hearings will only harm the cause of immigration reform.

Congressman Reyes joins me tonight from El Paso, Texas. And thanks very much for being here with us, sir.

REP. SILVESTRE REYES (D), TEXAS: Glad to be here, Kitty.

PILGRIM: You know, you did a radio address over the weekend. I'd like to refer to it. You talked about the congratulations hearings that Republicans are holding this week. And this is what you said. "In these hearings, the Republicans will try to distract the country and pretend like they are working on the issue of immigration. In reality, this political show is nothing more than a tactic to prolong what our community and Democrats all want -- which is comprehensive immigration reform."

Why do you say this is a tactic? This is a very grassroots issue. Going to the communities in several cities makes perfect sense. Why are you accusing them of tactics?

REYES: Well, it would have made sense, Kitty, if these hearings had been done before the legislation had been crafted. The legislation has been crafted in the Senate and also in the House. All that's lacking now is for them to go to conference and come out with a recommendation from that conference that will be voted again in the Senate and in the House.

If you were going to have hearings, the hearings should have taken place before the legislation. This is clearly just a stalling tactic to try to get to a point to where they can say, well, we're not going to be able to have enough time because of the November elections. That's what they're shooting for.

PILGRIM: I understand. You're a 26-year veteran of the U.S. Border Patrol, sir. You are opposed, however, to deploying National Guard troops on the border. Why is that?

REYES: Well, for a number of reasons. First of all, the -- today, with the stress that the forces is feeling because of Iraq and because of Afghanistan, it's the worst of times to even consider putting the National Guard on the border.

Other basic differences I have include the military being trained for combat. You're asking them to step in and largely support function for a law enforcement situation. It's unfair to border communities like mine, and it's unfair to the soldiers that you are asking maybe one month to be on the border doing law enforcement related work, and then months from now put them in Iraq or Afghanistan, where they're going to have to face combat situations. It's not good policy. It doesn't make sense. What we ought to be doing is addressing the shortage of resources for the Border Patrol and the Customs Service.

PILGRIM: We're almost out of time, but I'd be remiss if I didn't ask you. You've been -- you played a role in creating the annual U.S.-Mexico border issues conference. And so what do you think about the outcome of the Mexican elections and how this will affect the issue that's very, important to Americans?

REYES: Well, we're not out of the woods yet. I think we're going to see some demonstrations nationwide in Mexico. The results, certainly I'm happy with, because I think the Calderon administration will be easier to work with. And I know the Congress is going to be fragmented, but we actually have established a good working relationship on a Congress-to-Congress basis that we can work from. And so, I'm looking forward to the new Congress coming in in January and us getting back to work on the issues, as you mentioned, that are so vitally important to both the U.S. and Mexico.

PILGRIM: Thank you very much for being with us. Representative Silvestre Reyes.

REYES: Thank you.

PILGRIM: And have a happy Fourth of July, sir.

REYES: Happy Fourth to you, too.

PILGRIM: Still ahead, more of your thoughts on illegal immigration and the great American giveaway. Results of tonight's poll.

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PILGRIM: Now the results of tonight's poll: 97 percent of you say that U.S. companies should be required to hire U.S. veterans instead of seeking out cheap foreign labor.

Let's take a look at more of your thoughts.

Karen in Wisconsin writes: "As long as we're one big country with Mexico, how about we get the vote to pick their next president?"

And Jack in Florida writes: "After the illegal aliens help elect the next president of Mexico, they can then help us, U.S. citizens, elect our next president in 2008. Only in America."

And Kathy in Indiana writes: "Seems Congress and this administration are having a huge garage sale. They have sold our seaports, they've sold our airports, and our borders. I wonder when they'll sell us, the American citizens."

Dave in Florida writes: "I think our current administration puts us at more risk than the media. I trust the media! Well, most of the times." And Jo Ann in Texas: "If the central government can pick and choose which immigration laws to enforce, do citizens have the same latitude regarding the nation's laws?"

Charles in Ohio: "The U.S. government is quickly accomplishing what foreign powers or terrorists have been unable to do: Eliminate the sovereignty of the United States."

We love hearing from you. Do send us your thoughts at LouDobbs.com, and each of you whose email is read on this broadcast will receive the copy of the book, "Exporting America."

Thanks for being with us tonight. Please join us tomorrow for a LOU DOBBS TONIGHT special report on America's broken borders. The United States is deeply split over illegal immigration and border security. Will America have real immigration reform? For all of us here, good night from New York. Have a safe and happy July 4th holiday. "THE SITUATION ROOM" starts right now with John King.

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